High Court rules tenants cannot recover insurance commissions from landlords

Posted Wednesday 16th July 2025

London Trocadero (2-15) LLP v Picturehouse Cinemas Limited & Others [2025]

A recent High Court decision has significant implications for commercial landlords and tenants, particularly regarding how insurance premiums are structured and recovered under leases.

Summary of the decision

In this case, the insurance arrangements in the lease required the landlord to insure the building with the costs being recoverable from the tenant.

The landlord had agreed their broker a commission sharing agreement that resulted in both the broker and the landlord receiving a commission for arranging the buildings insurance cover.  This is not inherently unusual, but in this case the commission arrangements resulted in the tenant paying approximately £175,000 for buildings insurance cover that cost the landlord, free of commissions, roughly £80,000 to arrange.

The tenant did not dispute the cost of the cover or the legitimacy of the broker’s proportion of the commission, but they argued that the “landlord’s commission” was incapable of being recoverable under the terms of the lease as it was designed by the landlord as a means of profiting at the tenant’s expense.

The High Court agreed, holding that:

• Only the genuine cost of insuring the property is recoverable, i.e. those costs payable to the insurer in order to keep a building insured.
• Commission payments rebated to the landlord are not part of the “premium” payable under standard insurance arrangements.
• The lease did not allow for recovery of costs associated with arranging insurance, and the court refused to imply such a right.

As a result, the tenant succeeded in recovering previously paid “landlord commissions” by way of restitution.

It is worth noting that the landlord has stated an intention to appeal the decision, so this position may well be subject to change.

How this affects landlords and tenants

Commission-sharing arrangements between landlords and brokers have become common in the commercial property market and may now be open to challenge.

Landlords with large property portfolios, particularly institutional landlords, could face a wave of restitution claims if they have applied “landlord commissions” to their insurance demands over time, subject to the usual six-year limitation period from the date of overpayment (noting that this can be extended in certain circumstances).

Where claims arise, landlords will be the ones in the firing line but it may be that they can seek contributions from the following in certain circumstances:

• Managing agents who advised on or facilitated the commission structures
• Solicitors who drafted or reviewed the lease wording
• Insurance brokers who benefitted from the commissions

What affected parties should do now

• Landlords should urgently review their insurance arrangements and lease wording to ensure that they are aware of any potential exposure.  If commissions or fees are to be charged for arranging insurance, leases must contain clear, express provisions allowing this.  Any amounts charged should be reasonable and proportionate to the service provided.
• Tenants who suspect they have been charged insurance premiums that contain charges that do not directly relate to the provision of buildings insurance should review their lease terms and consider whether there are grounds to bring a restitution claim.
• Professional advisors involved in lease drafting, property management, or insurance placement should assess potential exposure and ensure future agreements include precise drafting and full transparency.
• Parties should be aware that regulatory scrutiny in this area is also increasing, with the Leasehold and Freehold Reform Act 2024 (expected to come into force in late 2025 or 2026) capping fees landlords and agents can charge leaseholders in multi-occupancy buildings, separating insurance premiums from administrative charges.

Conclusion

Landlords and tenants alike need to be increasingly aware of what constitutes a legitimate and recoverable cost under their leases.  What have become established practices are likely to see increasing scrutiny over the coming years and landlords could be left exposed to claims if they don’t react in time.

If you would like to discuss this issue further, please contact Richard Showan.

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This article is for reference purposes only. It does not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking or deciding not to take any action.

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